WuXi PharmaTech (603259): CRO & CMO Tap: Keeping track of the past

WuXi PharmaTech (603259): CRO & CMO Tap: Keeping track of the past
Investment highlights for the first time covered the recommended grade given by WuXi AppTec (603259) with a target price of 108.00 yuan, corresponding to 55 times the price-earnings ratio in 2019.The reason is as follows: With the global order transfer + domestic transformation demand, China’s CRO & CMO rise rapidly.The seriousness of new drug research and development, the continuous expansion of research and development, and the termination of a large number of innovative drug patents have led to an increase in cost control intentions of innovative drug companies, while the cost advantage of expanding business in Asia is obvious.After 2015, the national transformation policy encourages and the acceleration of imports will force the average value to push the expectations of domestic pharmaceutical companies to replace third-party breakthroughs, and China’s CRO & CMO industry is gradually rising rapidly. The industry chain extends from top to bottom, transforming from customer needs after going.The company is the first domestic CRO & CMO leading company in the world.Since its establishment in 2000, the company’s business has continued to extend from the upstream to the downstream of the industrial chain. At present, the business has covered all areas of CRO and CMO.The advantages of customers accumulated in the upstream of the industrial chain gradually, and the company gradually promoted the downstream conversion of customer orders.At present, the company has achieved significant transformation results in the CMO field. At present, the CRO field layout has been completed, and the order conversion in the research field is worth looking forward to.In the future, the company’s orders 南宁桑拿 will continue to be converted downstream, customers will continue to increase, the scale of orders will continue to increase, and the added value of expanding business will be a step further. Establish a drug research and development ecosystem, from capturing demand to creating demand.Business scale. After 2011, the company began to increase research and production outsourcing in the medical device, cell, and gene therapy fields in the United States, strengthening the company’s advantages in scale in a wider range.Customer scale, gradually improving The company gradually improves the long-term value of small and medium-sized customers, taps potential needs, uses the experience and historical data accumulation of the entire pharmaceutical R & D industry chain, actively nurtures and accelerates the progress of customer R & D, and truly realizes the reduction from capturing demand to creatingdemand. What makes us different from the market?Analyze the scale effect of the company’s industrial chain extension from the two lines of R & D and production; compare and subdivide the industry chain layout modules of some peers. Potential catalysts: expansion of CMO production capacity and development of clinical CRO. Earnings forecasts and estimates We expect the company’s EPS for 2019-2021 to be 1.96 yuan, 2.44 yuan, 3.01 yuan, CAGR is 24.09%, current A shares are expected to correspond to 45/36 times P / E in 19/20, and current H shares are expected to correspond to 43/34 times P / E in 19/20.The company’s huge investment income of US $ 600 million in 2018 led to a substantial increase in the company’s profit for the year.Taking into account the certainty of the company’s CRO / CMO business growth and the role of the future domestic demand for innovation to promote the company, the first coverage of the target price of 108 yuan (corresponding to 55/44 times 19/20 P / E, 215% upSpace), giving H shares a target price of HK $ 120 (corresponding to 54/44 times 19/20 P / E, 27.1% upside), given A / H shares recommended rating. The volatility of risk outsourcing business orders, foreign exchange risks, and restricted stocks are lifted from listing and circulation.